The coalition Government entered office with election pledges from both coalition parties to tackle the last Government’s “ports tax”—unfair backdated rates bills incurred by some businesses, including many situated in ports. The policy will also benefit businesses outside of ports, which meet the criteria.
Until 2008, a number of businesses in each of the 55 statutory ports in England (approximately 700) and Wales, understood that they were not individually liable for businesses rates, as they believed that there was a combined bill that was paid by each port operator (their landlords) on behalf of all the firms within it.
Following a review that was originally initiated in May 2006, the Valuation Office Agency decided that each firm was now a “separate occupation” and must each pay an individual business rate bill. The agency retrospectively backdated the rating list, which led to new tax bills for local firms to 2005, as required by legislation. As a result, firms including many based within ports across the country were hit with unexpected, massive bills, compounding the effect of the economic recession at the time.
For many ratepayers, this was a totally unexpected tax change. In the case of companies operating in ports, the ports firms were contractually unable to renegotiate their contracts with the port operators to have a reduction in rent to compensate. No impact assessment was made, no consultation was undertaken and no assessment was ever made of the effect of these retrospective taxes on the wider economy.
The combined effect of these tax changes had the potential to harm the wider economy, as a range of companies are based in ports, such as the car industry, reflecting the era of globalisation.
The last Government amended regulations to allow the retrospective business rate bills to be paid off over eight years in instalments. However, firms were still required to pay the taxes, and under company law, they had to declare these liabilities in their accounts, which would have made some firms technically insolvent.
The coalition Government announced in June 2010 that we would waive these backdated bills. Businesses told Ministers that the new taxes threatened jobs and investment.
This waiver required primary legislation, which was introduced in the Localism Act 2011. Today I have laid regulations that implement the cancellation of certain backdated business rates liabilities.
This coalition Government have taken real action to deliver on pre-election promises, and this send a clear signal of this Government’s determination to support economic growth and Britain’s export trade.
The regulations come into force on 31 March 2012 and from that day, affected businesses in ports and across England, can at last claim back the relevant money they were required to pay and account for in the balance sheet. They can move forward with putting that money to its rightful use—to build up their businesses, retain jobs and benefit from international trade.
In Wales, this is a matter for the Welsh Assembly Government. It is disappointing that they have not chosen to support Welsh firms, despite the allocation of full consequential funding under the Barnett formula. That decision puts firms in Welsh ports at a competitive disadvantage to England.
The table below details how firms in each port in England will financially benefit from this tax cut.
Number of Businesses
Estimated Backdated Liability after Reliefs (£ Thousand)
Humber Sea Terminal
Manchester Ship Canal
Tilbury Container Services
Source: local VOA office records on ports
These figures are based upon VOA data as at 30 April 2010. The number of properties and rates cancelled may reduce by:
Appeals that have been subsequently determined;
The actual levels of relief granted are greater than the general assumption;
Companies who have gone bust will not receive a refund;
These figures are maximum limits because the data account for only one of the eligibility criteria (backdated liability of more than 33 months).